Washington: Low commodity prices, weak capital flows and limping demand in developed economies made the World Bank cut its global growth forecast for 2016 from January’s 2.9% to 2.4% on Wednesday. Commodity-importing emerging markets benefit from the scenario. China’s growth forecast was at 6.7%, though growth may reach 6.3% by 2018. India stands tall with its 7.6% growth due to economic expansion.
Domestic demand is fueling growth in the Euro area, while the economic recovery in the United States remains firm on the back of resilient private consumption. As a result of more benign global financial conditions and resilient growth at home, the Federal Reserve is adopting a more hawkish tone and some Fed members are eyeing a summer rate hike. While China’s authorities have started to unwind its policy stimulus amid fears that credit-fueled growth could exacerbate economic imbalances, the strong rebound in economic data observed at the end of Q1 signals that the government will not allow the economy to slow sharply. In Japan, a still-weak economy will likely force the government and the Central Bank to deliver further fiscal and monetary easing in the coming months. Moreover, the steady increase in commodity prices that has been observed since mid-January provides some relief for some battered emerging-market countries.